Europe is trying to woo Southeast Asia — but it won’t win it over the U.S. or China

Amidst rising tensions in the South China Sea and uncertainty surrounding U.S. trade policy, European leaders are seeking stronger ties with Southeast Asia, positioning themselves as an alternative ally. While the EU offers diversification in areas like energy security and green infrastructure, analysts doubt Europe can displace China or the U.S. due to the region's reliance on established economic ties, with China leading trade at $982.3 billion in 2024, followed by the U.S. at $476.8 billion, and the EU trailing at $299.7 billion; increased trade reforms would be necessary for Europe to effectively compete.

Analysis

European leaders are intensifying engagement with Southeast Asia, driven by Washington's aggressive tariff policies and China's increasing assertiveness in the South China Sea, as highlighted by recent Chinese bomber plane sightings near the Paracel Islands. French President Emmanuel Macron, at the 2025 Shangri-La Dialogue, advocated for stronger EU-Indo-Pacific ties, positioning Europe as an alternative ally. Europe sees potential in Southeast Asia for its defense sector, diversified supply chains to reduce reliance on the U.S. or China, and access to raw materials vital for its green and digital transitions. However, analysts express skepticism about Europe's capacity to displace the U.S. or China, primarily due to entrenched economic dependencies. Trade data underscores this challenge: in 2024, China's trade with Southeast Asia reached $982.3 billion, the U.S. $476.8 billion, while the EU's trade lagged at approximately $299.7 billion (€258.7 billion). Experts like Teneo's Bob Herrera-Lim emphasize that "relationships are built on economic ties in Southeast Asia, more than anything else," and significant trade reforms or commitments from Europe would be necessary to compete, especially as EU-ASEAN free trade agreement talks have stalled. While not a primary economic or military counterweight, Europe can offer "transparent, reliable partnerships" in strategic areas such as energy security, green infrastructure, and digital governance, thereby enabling Southeast Asian nations to diversify and enhance their resilience against hegemonic pressures, acting as a "crucial symbolic defence mechanism" according to Lizza Bomassi of EUISS.

Key Decisions for Investors

• Investors should closely monitor developments in EU-ASEAN trade negotiations and any substantive policy shifts from Europe aimed at increasing market access or investment, as these are critical for altering the current trade landscape dominated by China and the U.S.
• Consider evaluating opportunities in specific Southeast Asian sectors such as renewable energy, digital infrastructure, and potentially defense, where European partnerships could offer diversification and specialized expertise distinct from U.S. or Chinese offerings.
• It is prudent to assess the geopolitical risk premium for investments in Southeast Asia, factoring in ongoing U.S.-China tensions and regional territorial disputes, while also considering Europe's emerging role as a secondary partner that could aid regional economic diversification and resilience.